Shares of Nvidia (NVDA) continued to be on a downward trajectory in trading on Thursday even as the chip major’s Fiscal Q2 results surpassed Wall Street expectations. The impressive numbers did not seem to satisfy investors’ rising expectations for the company. NVDA stock has skyrocketed by more than 100% over the past year and has been on a remarkable growth trajectory, so perhaps investors are hungry for more.
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It is important here to note that Nvidia’s AI processors have resulted in a surge in AI technologies across the tech industry and driving a frenzy for the stock on Wall Street. This has resulted in NVDA’s market value touching the stratospheric $3 trillion mark.
Why Are Investors Concerned About NVDA?
Investors are worried about Nvidia stock for several reasons. For one, concerns are emerging about whether the AI hype cycle is sustainable over the long term, largely due to uncertainties about when and how this technology will significantly impact the bottom lines of tech giants.
Moreover, no company can sustain such rapid growth indefinitely. Adding to investors’ concerns are rumors of potential delays in Nvidia’s latest AI chips, known as Blackwell, which increased investors’ anxiety ahead of the earnings report. On the other hand, during Wednesday night’s earnings call, the company’s management reassured investors that they still expect to generate revenue from Blackwell within this fiscal year.
Furthermore, Nvidia guided for Q3 revenues of $32.5 billion, which could increase or decrease by 2%, and expects an adjusted gross margin of 75%. This was below analysts’ revenue estimates of $31.77 billion and a gross margin forecast of 75.5%.
Bernstein Analyst Remains Bullish on NVDA
Despite those drawbacks, Wall Street analysts continue to be bullish about the stock. In fact, five-star-rated Bernstein analyst Stacy Rasgon reiterated a Buy on the stock and raised his price target from $130 to $155, noting that the company continues to perform well amid high expectations.
He added that sequential growth in the data center segment is likely to continue into the year-end, driven by incremental revenue from its Blackwell chips in the fourth quarter. Rasgon also mentioned that the ongoing strength of the Hopper chip could further accelerate growth.
The analyst’s raised price target implies an upside potential of 27.7% from current levels.
Is Nvidia a Buy, Sell, or Hold?
Analysts remain bullish about NVDA stock, with a Strong Buy consensus rating based on 38 Buys and three Holds. The average NVDA price target of $150 implies an upside potential of 23.7% from current levels.
